How entrepreneurial was the UK in 2015?
[vc_row][vc_column][vc_column_text]How entrepreneurial was the UK in 2015? Thanks to new figures analysed by StartUp Britain and the Centre for Entrepreneurs, we know the answer: more than ever.
Using official data from Companies House on the number of businesses incorporated in 2015, we were able to both produce a figure for total start-ups over the past year as well as start-up rates for each and every UK local authority (see our interactive map).
Let us first take a look at the total figure: 608,110 businesses were started in the UK in 2015, a new record compared to 2014’s 581,173 start-ups and 526,447 in 2013 – fulfilling Startup Britain’s prediction of over 600,000 start-ups.
Despite a strong economic recovery driven by net job creation and earnings growth, more people than ever are deciding to strike out on their own, suggesting that we are witnessing a sustained cultural shift towards entrepreneurialism rather than a short-term response to the financial crisis and a poor job market.
The reasons for this shift are manifold. Attitudinal changes towards work in many advanced economies mean that autonomy and creativity are increasingly valued above stability and a linear career trajectory. Transformations in working practices, such as the growing popularity of remote and flexible working, are making it easier for budding entrepreneurs to manage their ventures alongside other commitments.
Finally, the UK’s regulatory and policy environment is particularly hospitable towards entrepreneurs, with flexible labour markets, a favourable tax regime and a whole host of government start-up support schemes (e.g. Start Up Loans and the New Enterprise Allowance) all incentivising business activity.
Research compiled by the Global Entrepreneurship Monitor (GEM), an annual measure of entrepreneurial activity in over 100 countries, also helps explain the UK’s start-up boom. According to GEM, when it comes to total early-stage entrepreneurial activity (TEA) – the number of nascent entrepreneurs and owner-managers of new businesses – the UK performs better than its European counterparts and is only below the US.
While the percentage of the 18-64 population engaged in TEA was around 6% between 2003 and 2010, over the last few years it has fluctuated between 8% and 10%, coinciding with the record start-up numbers tracked by StartUp Britain over the same period. GEM also finds a high level of regard for entrepreneurs in the UK, and optimism about start-up opportunities that has recovered to pre-2008 levels. So in many ways it’s no surprise that 2015 has broken records.
Regionally the picture is more nuanced. London continues to outperform the rest of the country (with over 200,000 company formations), thanks to its high quality entrepreneurial support structures, talent and access to finance. Many London boroughs feature as top areas for company formation on a per capita basis – occupying 15 of the top 20 local authorities.
But other areas are also thriving. For similar reasons to the capital, cities such as Manchester, Edinburgh, Glasgow, Bristol and Birmingham are among the top performers, while local authorities in proximity to large cities (also known as exurbs) such as Watford, Warrington and Luton have very high start-up rates relative to their small populations, suggesting they are successfully drawing on the nearby cities’ dynanism.
Look north, when statistics are combined for the individual local authorities that make up the Greater Manchester combined authority (GMCA), it outguns all other conurbations beyond London in total start-ups (though not on a per capita basis). This suggests there is some credence behind the government’s notion of a “Northern Powerhouse” focused on Greater Manchester.
Seaside towns Brighton, Poole and Southend-on-Sea also make the top 20 on a per capita basis, confirming a trend identified in a recent Centre for Entrepreneurs publication on the rising entrepreneurial tide lifting up British seaside towns.
However, many remote coastal and rural areas are amongst the poorest performers, highlighting the difficulties isolation poses for businesses. More surprisingly, celebrated university towns such as Oxford and Cambridge underperformed last year, with Cambridge startups per 1,000 people dropping from 15.9 in 2014 to 9 in 2015 and 6.8 startups per 1,000 people in Oxford. We should be concerned that universities are failing to capitalise on their entrepreneurial potential.
Improving national start-up figures means addressing the factors holding back under performing areas, while ensuring that the strongest performers do not slip up. These factors include the usual suspects such as access to finance, recruitment and broadband speeds, but also more intangible issues such as fear of failure. Indeed, GEM identifies fear of failure as a significant barrier to entreprise in the UK, with 43% of the population affected compared to 40% in Germany and 30% in the US.
This reluctance to take the gamble that starting a business always is can be measured in the gap between entrepreneurial intentions and entrepreneurial activity. The RBS Enterprise Tracker has consistently found that while around a third of UK adults surveyed would like to start their own business, only around 6% are doing so at any single time.
If we were able to make everyone in that third follow through on their intentions, we might be looking at 3,600,000 start-ups a year rather than 600,000.
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